Not our fault

In all the furore over the banking crisis it's easy to forget the root cause of our problems. We can blame the banks as much as we like for the credit crunch but ultimately this crisis is of our own making. It's not the fault of governments and banks but of borrowers who take on more debt than they can sustain in the long term.

But there wouldn't be borrowers without lenders, you may say. That's true. There is no doubt that lending policies in too many institutions have been woefully relaxed. Lending and borrowing involves risk - the bigger the risk, the more you stand to make if you pull it off. The banks can be blamed for the way they dressed up and traded this risk, even fooling themselves in to thinking they were simply being sophisticated, until it was too late.

But how can people be blamed for simply wanting to improve their lives? When house prices are rising we can see the way that those with mortgages enjoy the increasing values in their homes.

Equally, those with some cash to invest could be tempted in to buy-to-let arrangements. I recall friends telling me about the flats they had bought to rent out. Many of them, I am sure, did quite well. Only now, as prices and rents fall are they seeing their gains shrink somewhat, but most of them, I have no doubt, are still ahead. Only those who bought at the top of the market are suffering just now although their numbers will increase as the market falls.

I have lost money in shares - bank shares to be precise. They seemed a good investment three years ago. Nothing seemed more solid than a bank. But my stock market investments were relatively small (but big enough) so the pain is bearable (just).

One thing you notice among investors is that there is always a risk/return ratio. Why would anyone deposit money with an Icelandic bank, I wondered? Anyone could see that Iceland's economy didn't make sense. How can a country with a population the size of a small English city, lot of cod but not much else, be so prosperous? I don't suppose it worried those local authorities who decided that a seven per cent return in an Icelandic bank was better than five per cent in the UK. An extra two per cent can cloud your judgement.

Equally the return on buy-to-let five years ago was more like 9 per cent per annum and then there was the capital gain in the rising property price for extras.

There are people out there - lots of people - with money to invest who will tell you that only mugs would settle for five per cent, or at least they were saying that a year ago.

Today we may need to settle for something less and we may be saying goodbye to free banking too. That's one of the realities about banks. We might not feel too kindly disposed to them just now but we wouldn't want to be without them.

I get a great deal from my bank. It pays me good rates of interest on my deposit account and handles all my transactions without charging me, even paying a little bit of interest on my current account. I realise that this service is not free. It is costing the bank more to service my account, I am sure, than it makes in interest from my deposits. Maybe not. Maybe the bank is winning. I don't care. The point is that I feel I'm getting a good deal.

I don't have to carry around lots of cash. There are holes in the wall that give me money on demand. I can pay for a lot of things with a plastic card for which I get billed after payment and which gives me money back when I use it. That seems a good deal as long as I settle my account every month.

I don't borrow from banks, from credit card lenders or any institution. I have a little bowl of change for parking meters and a wallet with enough cash - pounds and Euros - to cover taxi fares, cups of coffee and an occasional copy of Private Eye. The house mortgage was paid off years ago before I told my employers I wanted to leave and they me gave a large sum of money to go away.

In some ways this troubles me. I feel too bloody comfortable and think that a bit of financial hardship would be motivational. To deal with this I tell myself I am not well off and choose friends (with a few fine and honorable exceptions) who are considerably better off than I am. Since wealth is relative this means I can happily wallow in the understanding that I am less well healed than many of those I know.

But this isn't poverty. All these newspaper headlines and panic reactions are a symptom of middle class angst - people on the up who have just taken a tumble.

Real poverty is something else, something consigned to the news in brief columns about atrocities and aids victims in Africa. It doesn't have a face beyond the clips they make for Children in Need with a visiting celebrity trembling with horror and frustration at the sight of a malnourished child.

We must, therefore, suffer our pain from the credit crunch with a sense of perspective. Perhaps we can't afford the cruise or that new cooker or the kitchen makeover or the X-Box 360. We may even have to forgo a bonus or possibly even a pay rise. But if we have our health and our families and food on the table we shouldn't complain. But we shall because the crisis wasn't our fault. We're all blameless.